TRAVERSE CITY -- Frank Lipinski worked his northern Michigan farmland for almost six decades, and carved out a living through bounty and drought, good times and bad.
Today, he's as upbeat as ever about the state's agricultural industry. With good reason: The state's $63 billion agriculture sector is bearing fruit for farmers, despite the battered condition of Michigan's economy.
A long-term increase in farmland values, combined with a recent price surge for products like corn and wheat and growing world demand for U.S. farm products, created a surge in farming incomes in Michigan and nationally.
"The reality is that the agricultural economy in Michigan is the only one that's hitting a home run right now," said Lipinski, a long-time dairy and corn farmer near Buckley in southern Grand Traverse County. "We're really hitting on all cylinders."
Michigan is among the country's most diverse states in terms of commodity production.
It produces more than 200 commercial commodities, trailing only California in agriculture diversity.
It leads the U.S. in the production of tart cherries and blueberries, is a source of sugar beets and other vegetables and specialty crops like grapes.
The state exports about one-third of its commodities, and generates more than $1 billion annually.
The state boasts just over 10 million acres of farmland and is home to about 53,200 farms, according to Michigan Department of Agriculture estimates.
"We're definitely growing, there's no doubt about that," said Don Koivisto, who heads the state agriculture department and who lives on a working centennial farm between Central Lake and Ellsworth in Antrim County. "The small farmers are growing, and the large farmers are maintaining."
Exports from farms in Michigan and across the U.S. are on the upswing as worldwide economic growth spurs demand for more food supplies. And the declining value of the U.S. dollar makes agricultural products more affordable for other countries.
Farm exports are expected to reach a record high of more than $101 billion this year, up 12 percent from last year, based on U.S. Department of Agriculture projections.
The USDA also estimates that net farm incomes across the country could top $92 billion this year, up 4 percent from 2007.
The rise in income and land values also pushed farm debt ratios to historic lows, with the USDA's debt-to-asset ratio dropping to 9.1 percent last year, the lowest since 1960.
'A lot more optimism'
Falling interest rates also make it easier for farmers to manage debt associated with land and equipment purchases.
Lipinski, who scaled back his farming this season because of health concerns, said higher farm profits attract more young people to agriculture.
"The thing we're seeing is a lot more optimism," Lipinski said. "When you can guarantee a profitable price, that beats growing something and wondering what you're going to do with it."
But farmers aren't reaping every benefit of higher commodity prices and surging exports. Fertilizer costs doubled and tripled in some cases, affecting the bottom line.
And they've witnessed steep increases in feed and fuel costs, much of it related to the run-up of both corn and oil prices.
"We're getting more money for our product, but it costs us more money to (produce) it," said Dean Edgecomb, a dairy farmer along Hammond Road in Grand Traverse County.
Edgecomb gets close to $19 for every 100 pounds of milk his herd produces, but said fuel costs jumped 66 percent over last year.
"We're getting more money, but we're not necessarily making more money," he said. "When you've got to pay $4 a gallon for fuel oil, that's quite a bit."
A Michigan State University report shows farmland values on the upswing -- though not as fast as some areas in the Midwest corn belt -- and analysts expect the trend to continue, at least in the short term.
Land values for field crops in southern Michigan increased more than 8 percent last year, and were up about 4 to 5.3 percent in the northern Lower and Upper peninsulas.
Over the past five years, farmland in northern Michigan and the U.P. increased on average about 8 percent a year.
"Land values have consistently trended up over time," said Stephen Harsh, a professor of agriculture, food and resources economics at MSU and the report's co-author. "But in the last year or so, we're in a whole new ball game with the biofuel development."
Fruit farm values soar
Some of the costliest agricultural land in Michigan includes fruit farms located near Lake Michigan.
Per-acre land values for fruit property averaged more than $6,100 last year across the state, an increase of more than 40 percent from 2006.
Farm land for corn and soybean production is valued at around $4,000 per acre.
Land values also have been buoyed by the state's burgeoning grape and wine industry.
Dan Matthies, an award-winning vintner at Chateau Fontaine Winery in Lake Leelanau who also works in vineyard sales, said prices for grape-producing land in northern Michigan continue to climb, reaching as high as $15,000 to $18,000 an acre for prime vineyard land in some recent sales.
"Farmers are asking higher prices for property if they find out it's the good stuff," Matthies said. "I think our land is worth every penny."
Analysts said it's difficult to gauge how long the upward trend in farm land values will continue.
A key component is whether federal lawmakers will pull back on an ethanol mandate that will require 9 billion gallons of the corn-based product be blended into the country's gasoline supply by Aug. 31, 2009, and increased to 36 billion gallons by 2022.
"It's going to be dynamic in the next three or four years," Harsh said. "It will take the market a while to figure out what the value of that land is going to be."
Farm facts
-- Michigan ranks fifth nationally in the export of fruits, and eighth in exporting vegetables.
-- The state ranked ninth in U.S. milk production in 2006, producing 7.1 billion pounds of milk totaling almost $1 billion in sales.
-- Michigan's nursery and perennial production ranks fifth nationally, while its floriculture, or flower farming, industry ranks first and Christmas tree production is fourth in the U.S. The combined wholesale value of those industries totals almost $800 million a year.
-- More than 1 million Michigan residents are employed in agriculture production, food processing and related businesses.
Source: Michigan Department of Agriculture
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